UK LNG imports to recover to near pre-Fukushima levels, analysts predict

Over the coming weeks the UK is set to see the highest import volumes of liquefied natural gas (LNG) for this time of year since 2011, analysts told Utility Week.

Following Japan’s nuclear shutdown in the aftermath of the Fukushima disaster three years ago, the global LNG market has tipped in favour of the Asia-Pacific region where strong energy market prices are more attractive to producers such as Qatar.

But this month the UK’s import levels are expected to almost double from the volumes seen in July last year, with three Qatari LNG cargo deliveries already received and a further three expected to arrive before the end of the month, said Thomson Reuters Point Carbon analyst Mai Phan.

The recovery in LNG imports comes despite historically low prices in the UK gas market because Asian demand has dropped, Phan explained.

“The Asian LNG market is bearish, with very low prices, because gas stocks are high following a milder than usual winter, and are expected to remain healthy through a cooler than expected summer,” Phan said.

Asian demand typically increases in July in response to the need for more gas-fired power to run air-conditioning units. Last year, UK import volumes dropped from an average of 48 million cubic metres per day in June to just 23 mcm/day in July as Asian demand picked up.

But this month the average is expected to remain strong at 41 mcm/day.

“Qatar is continuing steady shipments to the UK since it is a good place for it to sell any surplus volumes it has, due to the UK’s liquid spot market and Qatar’s ownership stake in the South Hook terminal,” Platts energy analyst Alex Froley said.

The steady flow of LNG into the UK gas market is expected to drive already weak gas prices even lower. Gas market prices are already at levels not seen since 2010.